Economic liberalization (1940s-1980s) in India

The license raj that existed prior to economic liberalization (1940s-1980s) in India did not allow foreign companies to enter the market. In the mid-’80s when the Indian government started permitting foreign companies to enter the Indian market through minority joint ventures. The entry of these new foreign companies transformed the very essence of competition from the supply side to the demand side. Hero Cycles manufactured Over 16000 Bicycles a day. They Sold about 86 million bicycles in aggregate as of 2002.They had nurtured an excellent network of dealers to serve India’s expansive markets. Over the years Hero Group had entered multiple business areas HMC initial plans called for both two-wheeler market and the electric generator market. HMC first chose Kinetic Engineering Ltd. And formed Kinetic Honda Motors Ltd. But this JV would work in field of Scooters Manufacturing. HMC came to Hero Group as the Last compromise choice for its motorcycle venture. Honda selected the Hero Group in 1984 for a variety of reasons, which included:􀂃 Its engineering capability􀂃 Relevance and salience of HERO brand.􀂃 Distribution network.􀂃 Commitment to Quality.􀂃 Know-how and experience in handling large volume production and distribution.􀂃 Tight focus on financial and raw material processes.􀂃 Cordial Industrial Relations Honda agreed to provide tech. know-how to HHM and setting up manufacturing facilities. This included the future R & D efforts. Both Partners held 26% of the equity with other 26% sold to the public and the rest held to financial institutions. HHM had grown consistently, earning the title of the world’s largest motorcycle manufacturer after having churned out 1.3 million vehicles in 2001.World’s largest two-wheeler manufacturer with annual sales volume of over 2 million motorcycles. Owns world’s biggest selling motorcycle brand – Hero Honda Splendor. Over 9 million motorcycles on Indian roads. Deep market penetration with 5000 outlets. The deep penetration network of hero largely benefited the sales .Absence of major competitors in initial years. Sound and proven technical capabilities of Honda and the reliability of Hero. Increased market for motorcycles :Better Fuel efficiency. Change in people’s perception .Decrease in price difference with scooters. The rising differences between the two partners over a number of issues gradually led to the Split of Joint Venture. Differences ranged from Honda’s refusal to fully and freely share technology with Hero, despite a 10-year technology tie-up that expires in 2014, even when Indian partner was paying high royalty to the Japanese company. Another major reason for Honda was the refusal of Hero Honda to merge the company’s spare parts business with Honda’s new fully owned subsidiary Honda Motorcycle and Scooter India (HMSI) In December 2010, the Board of Directors of the Hero Honda Group decided to terminate the joint venture between Hero Group of India and Honda of Japan in a phased manner. The Hero Group would buy out the 26% stake of the Honda in JV Hero Honda. Under the joint venture Hero Group could not export to international markets (except Sri Lanka) and the termination would mean that Hero Group can now export. Since the beginning, the Hero Group relied on their Japanese partner Honda for the technology in their bikes. So there are concerns that the Hero Group might not be able to sustain the performance of the Joint Venture alone.

Referring to the relevant theory, identify and critically analyze collaborative strategies which is being pursued as the mode of entry ?

Referring to the relevant theory outline the reasons behind the failure of this mode of entry and which of these reasons is more prominent and why?

Sample Solution